A very resilient Australian dollar, backed by a surge of strong local economic data, and an overbought kiwi has helped to push AUDNZD to an important long-term resistance zone. This long-term downward trend line has guided price during the steepest part of AUDNZD’s recent fall, which was underpinned by a divergence of monetary policy and economic conditions between Australia and New Zealand.
Last month AUDNZD bounced off a key support zone around 1.0520, before pushing towards the aforementioned trend line. The pair’s quick rejection around 1.0520 suggests that there are still a significant amount of bulls waiting to pounce when price action gets too low. Also, this rejection resulted in a double-bottom for price – typically a bullish indicator.
However, can price break this significant long-term downward trend line that it’s currently bumping into? NZDUSD recently broke out of its long-term upward trend which suggests that kiwi bears may be gaining strength. Also, there is a possible bullish divergence between RSI and price action in AUDNZD (see chart), thus we cannot rule out a more prolonged correction higher for the pair. Yet, if the pair remains in its long-term downward trend it may attempt to make another run at a support zone around 1.0520.
Fundamental events:
- Australia’s Feb. retail sales (0030GMT today) – exp. 0.3%; prior 1.2%
- Australia’s Feb. trade balance (0030GMT today) – exp. 800M; prior 1,433M
- Speech by RBA Governor Stevens in Brisbane today at 0200GMT
Source: FOREX.com
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